An IHT gifting allowance update to £11,000 could cascade £82.6bn to lower generations, Old Mutual Wealth has said.
Under current inheritance rules, the maximum amount that an individual can gift tax free is £3,000 per year. Old Mutual Wealth has found that “over 60% of the 17.2 million over 55s would consider or would definitely gift more to their loved ones” and “71% want to pass on their wealth during their lifetime”.
The inheritance tax gifting allowance has remained unchanged since 1981. However, according to the Bank of England inflation tracker, “it would be permissible to gift £10,932.20 per tax year in 2017” had the annual allowance tracked inflation.
Old Mutual Wealth tax and financial planning expert Rachael Griffin commented: “The tax system has, in essence, encouraged people to pass on wealth when they die if they want to avoid tax for certain. While 30 years ago that may have made sense, in 2018 people are living longer and retired households are at historic highs in terms of the wealth they hold relative the working-age population. Plus, £3,000 won’t go far these days, but £11,000 could give children or grandchildren the necessary money for annual school or university fees”.
Old Mutual Wealth is today urging the government to reform the tax system, which currently discourages family members from helping their family financially whilst they are still alive.
The annual gifting allowance is being looked into as part of the upcoming review into inheritance tax by the Office of Tax Simplification.
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